One of the biggest criticisms of the Modi government during the 2019 Lok Sabha Elections was the inability to control unemployment. Even though India has seen significant growth, creation of employment opportunities has continued to be a concern. The reports of a global economic recession have further led to a slip in various sectors.
With the current unemployment rate at 6.1%, India as an economy will lose out on prominent gains if the challenge of jobless growth is not countered. As India is on its way to become a 5 trillion dollar economy by 2025, here is an overview of India’s systemic jobless growth:
Every country follows a pattern of the economic cycle – there are periods of expansion or growth and then there are periods of contraction or recession. The GDP of a country contracts, unemployment increases and industries lose markets, marking a recession.
After a period of time, the economy stabilizes itself and cyclic recovery takes place. In the period of cyclic recovery, the core industries recover quickly, employment opportunities are recreated helping people to raise their income, in turn leading to economic growth. But sometimes, There is a structural change noticed in the economy. This means that the economy has undergone changes such as new technology, shift of focus into a new sector etc.
Often, structural changes are great for emerging industries and hence, the GDP of the country increase. But, there is a loss of employment due to automation of jobs and requirement of new skills for the employment in the emerging sectors. Further, the core employment generating industries do not necessarily recover room the recession but there is growth observed in the economy. This leads to the phenomena of jobless growth.
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Meaning of Jobless Growth
Jobless growth can be defined as an economic condition in which a macro economy experiences growth while maintaining or decreasing its level of employment. The term was coined by the economist Nick Perna in the early 1990s.
This indicates that the economy is undergoing structural changes which are great for some industries but difficult for some and definitely a bad news for employment rates. It is important for an economy to identify its core industries and work towards its recovery. Such unemployment also leads to an uncertain future and job prospects which puts the goals of the economy at a risk.
Jobless Growth Trends in India
The recent report of the Periodic Labour Force Survey has led to two major conclusions regarding India’s current growth – the labour force is shrinking and unemployment is rising. Though the present number of 6.1% might not indicate much, the fact that it is the highest unemployment rate since 1971-72 would represent the gravity of the situation. Between 2016 and 2017 about 1.5 million jobs were lost only in the BSIF, IT and Telecom Sector due to consolidation.
This does not mean that Indian economy is not growing. India’s GDP growth rate is unprecedented with a 5 year average of 7.5 %. But, the World Bank has said that India has to create 13.5 million jobs to catch up with similar income level countries. Further, India is experiencing rise in unemployment in both location and gender dimensions.
According to The Hindu, “The highest unemployment rate of a severe nature was among the urban women at 10.8%; followed by urban men at 7.1%; rural men at 5.8%; and rural women at 3.8%.”
The problem is that the government is continuously increasing public spending for job creation instead of looking at other aspects. If India doesn’t work towards solving this issue, the much discussed demographic dividend will be a bane.
Around the world
This is not a phenomena being experienced only in India. Around the world, this lack of jobs is a threat to economies. The major impact is in the form of absence of income to lower strata of the society and immigrants. In the US, Hungary and Brazil, this condition is prevalent.
The world as a whole is facing a major unemployment or underemployment crisis due to new structural changes in the global economy. Further, the International Labour Organisation in its recent report has called this worldwide condition “wageless growth”.
Agriculture engage about 45% of Indian population but has only 12% contribution to GDP. Service sector is experiencing growth in employment and wages but only 30% of the population engages in it. Sectors in the market which are currently growing are not employment intensive.
India’s GDP was first dominated by agriculture and then the service sector came in. It did not see an industrial sector domination which is often labour intensive. This has led to lack of employment and growth by the manufacturing sector
Today, the needs of most jobs have changed. India has experienced immense growth in cities where infrastructure was available to integrate these changes. Rural areas are experiencing a lack of basic infrastructure like electricity and computers leading to it being robbed of jobs.
Automation of jobs which were previously labour intensive is yet another reason. Those whose jobs have been automated need to find new areas to engage themselves in often those for which they haven’t been trained for.
India’s investment in developing students with market relevant skill set has been negligent.
While illiteracy is a major issue what is more concerning is graduates who cannot find jobs because they do not possess important skills such as communication. Further the education system does not train students to develop adaptability.
Societal reasons like lack of women participation in the job market still exist. Many labour intensive sectors do not have facilities for women and even in cities, women are expected to be homemakers at least after childbirth.
Policy changes by the government have been affecting the job market strangely.
Make in India, for example, was expected to increase employment opportunities. But it encouraged big sectors like steel where 3-4 people were employed for 1 lakh of investment in comparison to smaller sectors like food processing where 28 jobs are created for the same investment. Therefore though investments came in jobs didn’t.
Downsizing by large manufacturers has been yet another cause. MNCs are finding the domestic competition harder that they thought and extreme governmental regulations are not helping the cause. Even start-ups which are expected to become main stream in the coming years have had to downsize due to financial situation.
#1. Rise of Populist Governments: Jobless growth has shown its effect in the rise of right-wing populist governments, not just in India but across the world. Unemployment mostly affects the income levels of lower middle class and those in below poverty line. Hence, they indulge in electing governments who endorse populist schemes and indulge in public spending to solve the problem.
#2. Uncertain Future: With structural changes in the job market in particular and the economy in general, jobless growth in India is seen as a measure of an uncertain future. There is a dilemma on investing in higher education due to lack of jobs. Further, automation and technology has shown that no job is safe. It has become impossible to predict future trends in the job market and hence, a sense of confusion and panic is sensed.
#3. Underemployment: Lack of jobs and necessary of income has led graduated youth to take up jobs which do not require any particular skills and hence have a very low income. Many job seekers have realised that either their skills have become outdated or the Indian job market is not sustainable for their area of education. Even though a degree holder is working today, he might be working as a delivery boy. Thus, jobless growth has led to disguised unemployment.
#4. Rise of Gig Economy Jobs: As jobs are reducing, so is job loyalty. Working for a single company has become a thing of the past with rise of freelancing and contract based employment. The gig economy jobs are often criticised for worker-exploitation and lack of stability. But, due to jobless growth, gig economy has been one of the only links to obtain employment and be relevant in the job market.
#5. Destruction of Jobs: Another phenomenon noticed as a result of jobless growth is loss of jobs. Globalisation, automation and digital transfers, have vanished the need for jobs and skills which were previously important. Further, it is taking less and less people to do the same job. In 2009-10 it took 31,846 employees to deliver $1 billion worth of exports in IT sector. In 2015-16 it needed just 16,055 employees.
What should be done?
India needs to take steps to combat this phenomenon. With growing population and various unutilised resources, such growth will not last longer. Both short term and long term measures are required in this regard:
- Improving of labour market information system is the first step. We need to have enough data to engage in better policymaking, to study the trends of the job market and predict future trends. This has to done at district, state and national levels
- The education system must not only look at making a student qualified for a job but also look at teaching skills sets required based on the demands of the market analysed by the data.
- In the long run, Labour Market Reforms are required to fine tune the economy. This may include reducing regulations and making it attractive for employers to hire young workers. Clearly, good policymaking will be a key in solving the issue.
- Encouraging Medium scale industries which are usually labour intensive are necessary. They must be provided with infrastructural support and access to credit.
- Manufacturing sector is automating at a rapid speed. Hence, development of workers for technology based manufacturing jobs is necessary. These jobs are expected to be high skilled and connected through technology.
- Smart urbanization is the key. The impact of infrastructure on job creation can be seen in Bengaluru. Extending basic infrastructure to rural areas along with preparing for massive rural urban migration in the coming years will ensure jobs which promote growth
The Way ahead
The trends in the recent budget have shown that India has realised the importance and necessary of combating jobless growth. Though there are a number of ways this can be handled, the challenges are also many – Identifying unemployment, creating sector based policies and data deficit to name a few.
But the first step is to understand and make others understand that the nature of jobs is changing – not only in India but the entire world. If we do not modify ourselves to the requirements of this, we will be left behind. It is the position of jobs in India’s growth story that will determine whether it is a success story or not.